BANK OF AMERICA: Market bulls have been 'silenced' — but there are 2 big reasons they refuse to give up on stocks

Yet the stock market continues to climb higher, and BAML sees two reasons investors are so reluctant to throw in the towel.

As the stock market has shaken off recent turbulence and continued its long-running chug higher, some shifts have occurred under the surface that suggest investors aren't as confident as they seem.

For one, cash holdings jumped to 5% from 4.6%, according to Bank of America Merrill Lynch's latest monthly fund-manager survey, which includes 216 panelists who manage $646 billion. That risk-averse behavior has also been accompanied by equity hedging levels hitting 18-month highs.

Bank of America Merrill Lynch

Further, a record number of BAML's survey respondents said companies were excessively levered.

That would all suggest the stock market is heading for some sort of bearish reckoning — the type that transpires when investor sentiment rolls over and traders flee to safety.

Not so fast, says BAML, which sees two main drivers keeping equity demand afloat.

The first is extremely straightforward: Fund managers simply don't see an imminent catalyst threatening stocks. Just 13% see recession as likely, while only 18% think the nine-year bull market has peaked. As BAML's chief investment strategist, Michael Hartnett, puts it, a "true bull capitulation is absent."

Bank of America Merrill Lynch

Second, BAML argues fund managers don't have a favorable alternative. When it comes to investing in bonds over stocks, the firm says 10-year Treasury yields will have to hit 3.5% before such a strategy becomes truly enticing. As of Tuesday morning, that yield was at 2.83%.

Still, if the past few months have been any indication, stock market conditions can flip at a moment's notice. One potential catalyst is earnings season, which has historically dictated short-term equity fluctuations. While large Wall Street banks have largely exceeded analyst forecasts, BAML's survey shows global growth and profit expectations are at 18-month lows.

If the companies set to report in the coming weeks miss the mark, it's possible that uneasy market bulls will take even more drastic steps toward scaling back risk holdings. After all, if the survey is any indication, they're already headed in that direction.